The document discusses various trade and economic issues between India and the United States. It notes that while trade has increased significantly in recent years, both countries see barriers to even greater economic partnership. Key issues discussed include India's intellectual property protections, US visa policies, bilateral investment, defense cooperation, and negotiations on trade agreements.

1. BY – GARIMA BEHAL
HIMANI GUPTA

2. As the one of the world’s largest economy,
India is an important trade and economic
partner for the United States.
Although merchandise trade between India
and the United States has grown rapidly over
the last few years, each nation contends that
some aspects of the other’s economic and
trade policies hinder greater trade and
investment growth.
For example, the Obama Administration
considered India’s intellectual property rights
(IPR) protection as inadequate while the
Indian government considers current U.S.
laws on visas for temporary foreign workers
and payroll taxes as non-tariff trade barriers
that discriminate against Indian workers.

3. Ex-President Obama has called India one of the defining partnerships of
the 21st century. Presidents Clinton, Bush and Obama all visited India,
underscoring the increasing importance of the bilateral relationship.
The U.S. government aspires to reach $500 billion in annual bilateral
goods and services trade with India by 2024, a more than five-fold
increase from the $97 billion total in 2013.
The U.S.-India Strategic Dialogue, launched in 2009, was expanded in
2015 to become the U.S.-India Strategic and Commercial Dialogue. It
provides opportunities to strengthen collaboration in areas including
energy, climate change, trade, education, and counterterrorism. The
inaugural meeting was held in September 2015.

6. From a modest $ 5.6 billion in 1990, the bilateral trade in
merchandise goods increased to $ 66.9 billion in 2014. As of Jan 2015-
Indian Exports-
$ 34.57 billion
US
Exports(Indian
imports)-
$ 16.54 billion
Bilateral
Trade-
$ 51.11 billion
=
Precious Stones
(diamonds and gold)
Aircrafts
Machinery, incl.
electrical machinery
Optical and medical
instruments
Precious stones
(diamonds)
Pharma products
Mineral fuel
Organic chemicals
Textile articles
+

8. US Exports-
$30.17 billion
India
exports-
$28.59
billion
During the year 2012 (the latest year for which complete data on
services trade is available), bilateral trade in services totalled $58.76
billion.
Bilateral
Trade-
$ 58.76
billion
=+

9. The United States is the 6th largest source of foreign direct investment (FDI)
in India, contributing 5.4% of India’s FDI inflows cumulatively between July
2000 and July 2014, according to India’s Ministry of Commerce and Industry.
The U.S. Department of Commerce’s Bureau of Economic Analysis (BEA)
reports U.S. FDI in India reached $24.3 billion in 2013, about 0.26% of total
FDI in the United States.
More than 65 large Indian corporations, including Reliance Industries
Limited, Essar America, Tata Consultancy Services, Wipro and Piramal, have
together invested about US$ 17 billion in the U.S.

11. India on the Priority Watch List of the “U.S. Trade Representative (USTR) for
its inadequate IPR protection and enforcement.
Since 2012, India has denied or revoked patents for certain foreign drugs
because they did not meet its patentability standards of enhanced efficiency.
(Prevention of Evergreening)
The United States expresses concern that such requirements may have the
effect of limiting the “patentability of potentially beneficial innovations..”
India asserts that its actions reflect an effort to balance IPR protections with
the need to provide affordable access
to medicines for its 1.2 billion people. USTR continues to monitor India’s IPR
situation, and has called for greater transparency and stakeholder input in the
issuing of compulsory licenses.
In the 113th US Congress, legislation was introduced to make ineligible for
GSP benefits any country failing to provide adequate and effective IPR
protection.

12. In November 2011, India issued a “National Manufacturing Policy” to develop its
manufacturing base and boost employment. The policy calls for greater local content
requirements in government procurement in certain sectors, such as information and
communications technology
(ICT) and clean energy.
India’s Preferential Market Access mandate, which is based on this policy and currently
imposes local content
requirements for government procurement related to
electronic products, has been a particular source of friction
with the United States.
In February 2013, the United States requested formal consultations in the WTO
challenging India’s local content requirements and government subsidies for the production
of certain solar panel products, alleging that such actions
restrict U.S. market access in India.
India lost the case in 2016 and challenged the US localisation policy in the latter’s
renewable energy programme. The dispute is still under way.

13. The granting of temporary
visas for Indian nationals to
work in the United States is a
top trade concern for India.
• Professional specialty
workers
• Ceiling of 65,000 annually
• India accounts for 65% of
these ((2013)
H-1B
Visas
• Intra company transferees
• No limit
• 29% of such visas granted to
Indians (2013)
L1
Visas
US President Donald
Trump is expected to
sign a new executive
order aimed at
strangulating work-visa
programmes, as part of a
larger immigration reform effort.
The executive order ends employment authorisation cards to spouses on
such work visas, which was recently introduced by the previous Obama
Administration.
Trump would reverse Obama's extension of the duration of the optional
practical training work visas, which allowed foreign students to stay in the
US a bit longer after completion of their studies.

14. The US citizenship and immigration services (USCIS) has notified higher
application fee for heavy users of H-1B and L-1 visas, that would include a
large number of Indian information technology firms.
US employers of more than 50 people, half of whom are on H-1B or
similar immigrant visas, will be charged an additional $4,000 each, over and
above the basic processing fee.
For L-1 visas, required for a foreign national transferring to a US firm from
subsidiaries or units abroad, the additional fee is $4,500 each, also over the
basic fee.
These charges are effective retrospectively from December 18, 2015,
when a legislation passed by Congress was signed into law. And it will stay
in effect until 2025.
The additional charges are aimed at discouraging American employers
from hiring foreign workers, who eventually displace locals, it is argued, by
making it prohibitively expensive.

15. India and the United States began BIT negotiations in August 2009.
Support for a U.S-India BIT (or Bilateral Investment Promotion
Agreement, BIPA, as it is called in New Delhi) has increased in recent
years.
In September 2013, President Obama and then-Indian Prime Minister
Singh reaffirmed their commitment to concluding a high-standard BIT.51
The United States and India held technical discussions on the BIT in
February 2014.
The India-U.S. joint declaration of January 25, 2015 recognised the
significance of moving forward on high-standard BIT negotiations, which
would help in creating a predictable investment climate and boost bilateral
investment flows.
However there exist significant differences in the model treaties for both
the nations on the issues of taxation, IPRs and CLs, and investor state
dispute settlements.

16.  India would like U.S. to reduce the social security taxes from the pay
of Indian nationals temporarily working in the United States. Under U.S.
tax law, Indian nationals working in the United States under temporary
work visas must pay social security taxes although they may be ineligible
to collect social security benefits because the duration of their
employment in the United States is less than 10 years.
 Generally, totalization agreements allow workers (and their employers)
to contribute only to the foreign system if the worker is employed in that
country for five or more years, or only to the employee’s home system if
the worker is employed in the foreign country for less than five years.

17. Totalization agreements also waive the following two conditions for
receiving social security: (1) a foreign national’s benefits are suspended if
he or she is outside the United States for more than six consecutive
months; and (2) to receive payments outside the United States, generally
a foreign national dependent/survivor must have lived in the United
States for at least five years in the same relationship with the worker.
India would like to negotiate a totalization agreement with the United
States.

18. The U.S. Generalized System of Preferences (GSP) program expired on
August 1, 2013, after Congress did not extend the program beyond the
date stipulated in Section 1 of P.L. 112-40. The U.S. GSP program
provides non-reciprocal, duty-free tariff treatment to certain products
imported from designated beneficiary developing countries (BDCs).
One of the main issues in the current renewal debate is whether to
continue to provide BDC status to nations that are classified as upper-
middle-income countries or account for more than 0.25% of world trade.
India meets both of those conditions. In addition, some Members have
advocated eliminating or reducing India’s GSP benefits in response to
India’s stance on a number of trade issues.

19. Defense relationship has emerged as a major pillar of India-U.S.
strategic partnership with the signing of ‘New Framework for India-U.S.
defense Relations’ in 2005 and the resulting intensification in defense
trade, joint exercises, personnel exchanges, collaboration and
cooperation in maritime security and counter-piracy, and exchanges
between each of the three services. The Defense Framework Agreement
was updated and renewed for another 10 years in June 2015.
India has become the world’s largest “open” defense market,
accounting for about 10% of the $63 billion in global sales in 2013. It
imported nearly $2 billion worth of U.S. military hardware in 2013,
making it the largest U.S. export market. The two nations have signed
defense contracts worth more than $9 billion since 2008, up from $500
million in all previous years combined. Aggregate worth of defense
acquisition from U.S. defense has crossed over US$ 13 billion.

21.  India and the United States have launched a Defense Technology and
Trade Initiative (DTTI) aimed at simplifying technology transfer policies
and exploring possibilities of co-development and co-production to invest
the defense relationship with strategic value. The DTTI Working Group
and its Task Force will expeditiously evaluate and decide on unique
projects and technologies which would have a transformative impact on
bilateral defense relations and enhance India's defense industry and
military capabilities.
 Modi Government’s move to increase the FDI in defense from 26% to
49%, although a disappointment for those hoping that majority share
would be permitted—could lure more foreign investment by promising
greater repatriated profits, and could also make it easier for investors to
decline technology-sharing requests.

24.  Obstacles to initiating bilateral nuclear energy cooperation remained a
source of frustration for both U.S. officials and for U.S. companies eager
to enter the Indian market. The bilateral civil nuclear cooperation
agreement was finalized in July 2007 and signed in October 2008.
 Even after President George W. Bush’s landmark reversal of U.S. non-
proliferation policy and offer of full civilian nuclear cooperation with
India—a country that is neither a signatory to the Nuclear Non-
proliferation Treaty nor a member of the Nuclear Suppliers Group (NSG)—
U.S. firms remain unwilling to enter an Indian market regulated by strict
liability laws.
 India signed the Convention on Supplementary Compensation for
Nuclear Damage (CSC, which came into force on February 4, 2016) in
2010.

25.  During Prime Minister Modi's visit to the US in September 2014, the two
sides set up a Contact Group for advancing the full and timely
implementation of the India-US Civil Nuclear Cooperation Agreement, and
to resolve pending issues.
 The Group has held five meetings so far, and reached agreement on
the compatibility of India's nuclear liability law with relevant international
conventions and creation of an insurance pool drawing experience of best
practices to take care of nuclear liability risk.
 Currently, company-level discussions are on with two U.S. companies --
- M/s Westinghouse and GE Hitachi --- regarding techno-commercial
viability of their reactors in sites in Gujarat and Andhra Pradesh
respectively.

28. India and United States, as members of the WTO, are involved in WTO
negotiations to liberalize trade through the removal of barriers and
establishment of enhanced trade rules and disciplines.
India’s position on implementation of the WTO “Bali package”—an
agreement reached at the WTO Ministerial in December 2013 consisting
of new commitments on trade facilitation, agriculture, and development—
is a source of friction between India and the United States.
The Bali package represented a significant breakthrough from the
longstanding impasse in the WTO Doha Round.
One of the commitments of the Bali package is the Trade Facilitation
Agreement (TFA), which includes binding provisions for expediting the
movement, release, and clearance of goods at the border.

29.  WTO members were to begin the TFA implementation process by
notifying the WTO no later than July 31, 2014. However, in July 2014,
India withheld its support for the TFA Protocol of Amendment until the
WTO concluded a final agreement on public stockholding for food security
purposes. The United States sought safeguards in the food security
agreement to ensure that public stockholding programs do not act as
subsidies that distort trade, while India sought to ensure its flexibility to
address food security issues.
As part of the December 2013 Bali package, members agreed to a four-
year interim agreement that would shield India and other developing
countries from WTO legal challenges for exceeding their domestic support
limits under the WTO Agriculture Agreement, while they developed a
permanent solution on public stockholding by 2017.

31. India and the United States do not have Trade and Investment
Framework Agreement (TIFA) or a bilateral trade agreement at present.
India and the United States are currently pursuing different paths for the
establishment of a regional trade agreement (RTA) in the Asia-Pacific.
India is one of 16 countries negotiating the proposed Regional
Comprehensive Economic Partnership (RCEP), while the United States is
negotiating with 11 other countries to form a proposed Trans-Pacific
Partnership (TPP).
While some observers view RCEP and TPP as alternative models for
regional economic integration, others see the two RTAs as potentially
complementary frameworks. RCEP and the TPP are also considered
pathways for the possible formation of the “Free Trade Area of the
AsiaPacific” (FTAAP) envisioned by APEC ministers in November 2009.

33. India has sought membership in the Asia-Pacific Economic
Cooperation (APEC) for nearly two decades, but the existing APEC
members have decided not to accept new members at this time.
India’s lack of APEC membership may become an issue if India seeks
to join the proposed TPP, as it is assumed by some that APEC
membership is a prerequisite for TPP membership.

34. The Trade Policy Forum (TPF) was established in 2005 as the primary
mechanism to resolve India-U.S. trade and investment issues. Chaired
by the U.S. Trade Representative and the Indian Minister of Commerce
and Industry, it contains five focus groups: agriculture; innovation;
investment services; tariffs; and non-tariff barriers.
Active between 2005 and 2010, the Trade Policy Forum established a
bilateral dialogue to promote opportunities for Indian and U.S. small
and medium-sized enterprises (SMEs).
1. In 2005, it established the U.S.-India CEO Forum to allow
policymakers and business leaders from both nations to meet and
discuss major economic issues.
2. In 2007, the TPF created the Private Sector Advisory Group (PSAG),
composed of several experts from non-governmental organizations
(NGOs) in India and the United States.

36. An immediate concern for India would be Trump’s campaign platform
to reform the H1B system and pause the issuance ‘green cards.’ Silicon
valley had overwhelming come out against Trump and therefore it
remains to be seen if they will have any influence on the new
administration. But, at the same time, he may be persuaded by his own
party members who would be concerned if US companies lose their
competitive edge.
If Trump pursues the kind of isolationist “America First” foreign policy
he sometimes hinted at during the campaign, it would raise doubts in the
minds of Indian leaders about whether the United States can be a
reliable partner, especially in Asia.
But Trump’s recent call to PM Narendra Modi, extending a hand of
friendship and laying the ground for a bilateral meeting later this year, do
promise some good ahead. It remains to be seen whether Trump can
replicate Obama’s success as far as ties with India are concerned.